Suppose that Ann’s utilities for cherry and lime candies are c A and l A, whereas Bob’s utilities are c B and l B. (But once Ann has un-wrapped a piece of candy. Bob won’t buy it.) Presumably, if Bob likes lime candies much more than Ann, it would be wise to sell for Ann to sell her bag of candies once she is sufficiently sure of its lime content. On the other hand, if Ann un-wraps too many candies in the process the hag will be worth less. Discuss the problem of determining the optimal point at which to sell the bag. Determine the expected utility of the optimal procedure, given the prior distribution from Section 20.1.

  • CreatedFebruary 14, 2011
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